The Rise of Mortgage-Backed Securities: Struggles to Reshape Access to Credit in the USA

Abstract

One of the most important outcomes of federal reregulation of the financial services sector since 1989 has been the completion of the shift from locally organized flows of credit to the housing sector, to a national mortgage-backed securities (MBS) market. In this paper the way in which the rise of MBSs has reshaped access to credit across social and spatial divisions is examined, and the implications of battles to shape the MBS market and of the practices of the two principal agencies in that market for the geography of financial exclusion are explored. Although the reregulation of the government-sponsored secondary markets promises to help break down entrenched patterns of financial exclusion, the government-sponsored enterprises are placed in the complex position of mediating social demands for more inclusionary credit practices and investor demands for continued high returns and low risks. It is unclear whether reform efforts will be sustained in the new political and economic environment of the mid-1990s.